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Thanks! Jean Los Angeles Times, July 31, 2001 Tuesday, Home Edition, Page 13, 629 words, ????Commentary; ; The State Will Pay for Davis' Panic, KATHLEEN CONNELL, PETER ????NAVARRO, Kathleen Connell is California state controller. Peter Navarro is, ????an associate professor of economics and public policy at UC Irvine Los Angeles Times, July 31, 2001 Tuesday, Home Edition, Page 1, 1300 words, ????The State; ; Davis' Energy Advisors Draw SEC Attention; Probe: Under review ????is the possible use of inside information to buy power company stocks. GOP ????rival of governor requested the inquiry., WALTER HAMILTON JEFFERY L. RABIN, ????DARYL KELLEY, TIMES STAFF WRITERS Salon.com, July 31, 2001 Tuesday, Feature, 1723 words, Gray Davis' Edison ????problem, By William Bradley The San Francisco Chronicle, JULY 31, 2001, TUESDAY,, FINAL EDITION, NEWS;, ????Pg. A11, 849 words, S.F. to vote on electric power to the people; ????Measures would start public utility districts, Rachel Gordon, San Francisco The San Francisco Chronicle, JULY 31, 2001, TUESDAY,, FINAL EDITION, NEWS;, ????Pg. A1, 990 words, Davis' top spokesman bought stock in power firm; ????Adviser denies conflict of interest, Lynda Gledhill, Sacramento The Associated Press State & Local Wire, July 31, 2001, Tuesday, BC cycle, ????8:40 AM Eastern Time, State and Regional, 317 words, Will BGE split lead to ????Calif. power problems?, BALTIMORE The Associated Press State & Local Wire, July 31, 2001, Tuesday, BC cycle, ????7:17 AM Eastern Time, State and Regional, 651 words, Davis press secretary ????confirms buying energy company stock, By ALEXA HAUSSLER, Associated Press ????Writer, SACRAMENTO, Calif. AP Online, July 30, 2001; Monday, Domestic, non-Washington, general news ????item, 365 words, Calif. Sees $4B Less in Power Refunds, KAREN GAUDETTE, SAN ????FRANCISCO AP Online, July 30, 2001; Monday, Domestic, non-Washington, general news ????item, 263 words, Texas Inches Toward Power Deregulation, NATALIE GOTT, ????AUSTIN, Texas The Associated Press State & Local Wire, July 30, 2001, Monday, BC cycle, ????State and Regional, 471 words, Federal order limits potential state refunds ????by $3 billion, By KAREN GAUDETTE, Associated Press Writer, SAN FRANCISCO The Associated Press State & Local Wire, July 30, 2001, Monday, BC cycle, ????State and Regional, 539 words, Developments in California's energy crisis, ????By The Associated Press Copyright 2001 / Los Angeles Times Los Angeles Times July 31, 2001 Tuesday ?Home Edition SECTION: California; Part 2; Page 13; Op Ed Desk LENGTH: 629 words HEADLINE: Commentary; ; The State Will Pay for Davis' Panic BYLINE: KATHLEEN CONNELL, PETER NAVARRO, Kathleen Connell is California state controller. Peter Navarro is, an associate professor of economics and public policy at UC Irvine BODY: ??The five-to-20-year power contracts signed in a panic by the Davis administration have saddled California with billions of dollars of "stranded costs" that will burden our economy and state budget for years to come. ??Now, Gov. Gray Davis' spin doctors want us to believe that these $43-billion long-term contracts were both necessary and the impetus for a moderating energy market. Here's the real story: ??Last summer, under a flawed deregulation, a handful of large out-of-state generators effectively cornered California's wholesale electricity market. This "sellers cartel" first drained our electric utilities dry. In November, it became the taxpayers' turn to be victimized, when the Davis administration gave carte blanche authority to the Department of Water Resources for energy purchases. Between November and July, the department burned through $8 billion in short-term energy purchases, devouring almost the entire state budget surplus. This required the state Public Utilities Commission to pass the largest rate hike in California history and will require the state to issue $12.4 billion in bonds this fall to service this debt. ??In February, with spot market prices at all-time highs and rolling blackouts rippling through the state, the governor's representatives began to negotiate long-term contracts with the sellers cartel. This was an ill-advised long-term strategy to fight a short-run crisis. To understand why, look at the negotiating chessboard from the electricity cartel's perspective. The cartel's negotiators knew that within 18 to 24 months, there would be a huge glut of power on the market as many power plants were already under construction in California and throughout the West. Once the new energy resources were available, the cartel would no longer be able to manipulate the market. This supply glut would drive prices back to the 1999 range of three to five cents per kilowatt-hour, far lower than the prices now set in the long-term energy contracts. ??To the cartel members, this looming power glut was a recipe for heavy losses. Locking the state into long-term contracts at lucrative rates was their redemption. The Davis administration walked into this market inferno, bargaining from extreme weakness at the top of the market, signing contracts that were too expensive. The administration also capitulated on two highly objectionable clauses. The first requires the state to absorb all costs of environmental protection for many of the generators. The second holds the generators "harmless" for any increase in taxes imposed on the generators by the state. This provision essentially freezes taxes on the generators over the next several years, requiring taxpayers to pick up the tab. ??Notwithstanding the administration's spin, the current improvement in our energy situation may be traced to at least four other factors: This summer has been unusually cool, Californians have increased their conservation, recessionary forces have reduced demand and, most important, the Federal Energy Regulatory Commission finally imposed price caps on the sellers cartel, dampening market manipulation. ??The bottom line is this: Long after the rolling blackouts stop, California still will be saddled with billions of dollars of unnecessary electricity costs and high bond debt. These higher costs will hurt consumers and businesses, put heavy pressure on the state budget for years and inhibit the state's economic growth. ??There are two lessons from this multibillion-dollar mistake. The first is to have full public review of major energy decisions. Equally important, the Public Utilities Commission must be allowed to retain its rate-making authority so that problems are not hidden in a state bureaucracy. LOAD-DATE: July 31, 2001 ??????????????????????????????5 of 50 DOCUMENTS ??????????????????????Copyright 2001 / Los Angeles Times ??????????????????????????????Los Angeles Times ?????????????????????July 31, 2001 Tuesday ?Home Edition SECTION: California; Part 2; Page 1; Metro Desk LENGTH: 1300 words HEADLINE: The State; ; Davis' Energy Advisors Draw SEC Attention; Probe: Under review is the possible use of inside information to buy power company stocks. GOP rival of governor requested the inquiry. BYLINE: WALTER HAMILTON JEFFERY L. RABIN, DARYL KELLEY, TIMES STAFF WRITERS BODY: ??The Securities and Exchange Commission has launched a preliminary inquiry into whether energy consultants advising Gov. Gray Davis used inside information to trade stocks of power companies doing business with the state, a source with knowledge of the matter said Monday. ??The federal agency began its review late last week, the source said, in response to a request from California Secretary of State Bill Jones. A Republican rival of Davis, Jones charged that stock trading by consultants may have violated federal laws barring buying and selling based on information not available to the public. ??On Friday, top aides to the governor disclosed that five consultants had been fired for possible conflicts of interest between their official positions and their personal finances. ??As news of the SEC inquiry spread through the capital Monday, Davis officials were confronted by a flurry of questions about who in the administration owns energy stocks. ??Financial disclosure records filed by the governor's spokesman, Steve Maviglio, show that he owns between $10,000 and $100,000 in a Texas company he and his boss have accused of making "obscene" profits while California has been "on its knees." Maviglio said he bought the shares in Houston-based Enron Corp. in 1996. ??"It's not a crime to own energy stock," Maviglio said. ??He also owns 300 shares of San Jose-based Calpine Corp., which has the largest share of the $43 billion in long-term state power contracts. ??Maviglio placed the order for the stock on May 31, one day after San Jose's mayor dropped his opposition to a controversial Calpine plant favored by the governor and others. Under the terms of Maviglio's purchase, the transaction was completed about three weeks later when the stock reached $40 a share, a value of $12,000. It has since fallen in value. ??"I viewed it as a good long-term investment," Maviglio said, adding that he purchased the shares for his retirement account based on publicly available information. ??The Davis administration has spared Calpine the kind of fierce criticisms that it has leveled at other electricity suppliers, such as Enron. But California's grid operator has identified the company as one of many energy merchants to overcharge the state millions of dollars. ??The fired consultants also owned shares in Calpine, ranging in value from several thousand dollars to more than $100,000, records show. ??Another top Davis administration official, legal affairs secretary Barry Goode, disclosed in his economic interest statement that he recently held between $100,000 and $1 million in another out-of-state company accused of multimillion-dollar price gouging. ??In a statement, Goode said he sold his stock in Williams Co's. a month after he began working for the governor in February. Goode said the shares were supposed to be sold before he went on the state payroll, but his broker failed to do so. ??In light of the recent disclosures, Secretary of State Jones said the governor must do more to ensure the public that its interest comes first. ??"The governor should direct all of his staff to immediately file updated conflict of interest statements that reflect current holdings and any activity since their last statement of economic interest was filed," said Jones, who is seeking the GOP nomination for governor. ??Word of the SEC's entry into California's energy problems comes as the governor faces harsh criticism from lawmakers and others for the quick and broad hiring of highly paid private consultants to guide him through the crisis. ??In his written request to the SEC, Jones said that recently filed disclosure documents showed that at least one consultant bought and sold shares of two energy companies within the same month, raising "a red flag" about the possibility of insider trading. ??State law prohibits officials from participating in decisions involving their personal financial interests. ??The five consultants fired last week were among 11 named in Jones' letter, delivered to the San Francisco office of the SEC last Wednesday. It was not clear which individuals are the focus of the SEC's inquiry, or whether the agency's review would result in any charges. ??Two of the former traders said Monday that they had not been contacted by federal investigators and knew nothing of an inquiry into possible insider trading. ??But William Mead, fired Thursday, said it is no mystery why so many of his colleagues owned Calpine stock. ??Mead said he bought it 2 1/2 years ago and made so much money he recommended it to his colleagues last year, while they all still worked for the now-defunct California Power Exchange in Alhambra. Calpine power was not traded on that exchange, so there was no conflict of interest, he said. ??Mead and three other energy traders--hired by the state in February and March--were terminated by the Davis administration for allegedly buying power for the state from Calpine while owning the company's stock. Fired traders Herman Leung, Peggy Cheng and Constantine Louie did not list the date of their Calpine purchases on financial statements that the state required to be filed only two weeks ago. ??"But I'm sure they bought it while they were still at the power exchange, because that's when we discussed it," Mead said. "It was kind of like a hobby. I'm sure it wasn't done with the intent to manipulate." ??Former trader Elaine Griffin, who also owned Calpine stock and resigned two weeks ago to take another job, said she didn't know she owned energy securities until she checked with her financial advisor July 13, just before leaving her state job. ??Griffin said she and her husband own about $10,000 worth of Calpine stock in individual retirement accounts managed by their advisor, who bought the stock Feb. 1 without their knowledge, she said, after research found it to be a good investment. ??"I kind of feel like we've been used for political reasons," Griffin said. "We would have disclosed anything right at first, but they never asked." ??As a trader, Griffin said she occasionally bought Calpine power for the state, but only at market prices. ??Meanwhile, two Democratic political consultants, who helped Davis polish his image after the ongoing energy crisis caused his poll numbers to plummet, have agreed to accept no payment for their work as part of an out-of-court settlement of a taxpayer lawsuit. ??Tom Hiltachk, a lawyer for conservative anti-tax activist Lewis Uhler, said the settlement was reached last Friday after negotiations with lawyers for communications consultants Mark Fabiani and Chris Lehane. ??"Now they will not receive one red cent," said Hiltachk. "Very simply Mr. Fabiani and Mr. Lehane have agreed to cease all activities for the governor, to accept no payments for their services and to basically get out of the consulting business with the governor." ??As his part of the agreement, Hiltachk said, Uhler withdrew his lawsuit Monday morning. ??Uhler had filed a lawsuit against the two consultants and Controller Kathleen Connell in June contending that they should not receive any payments because of a conflict of interest. The two men also did consulting work for financially troubled Southern California Edison, which was seeking help from Davis and the Legislature. ??Connell, a former Los Angeles mayoral candidate who has been at odds with Davis since he endorsed an opponent, had held up the payments pending the outcome of the lawsuit. ??Under an agreement with Davis, the men were to have been paid $30,000 a month for six months. ??Fabiani and Lehane could not be reached for comment. ??* ??Times staff writers Nancy Vogel and Virginia Ellis in Sacramento and Robert J. Lopez in Los Angeles contributed to this story. LOAD-DATE: July 31, 2001 ??????????????????????????????6 of 50 DOCUMENTS ????????????????????????Copyright 2001 Salon.com, Inc. ??????????????????????????????????Salon.com ????????????????????????????July 31, 2001 Tuesday SECTION: Feature LENGTH: 1723 words HEADLINE: Gray Davis' Edison problem BYLINE: By William Bradley HIGHLIGHT: The governor struggles to orchestrate a multimillion-dollar bailout of the utility that has spent big bucks on his campaign. BODY: ??Ever since his January State of the State address, in which he dwelled on the state's power crisis but neglected to mention private utilities' central role in devising the deregulation scheme that caused it, California Gov. Gray Davis has been searching for a way to bail out the insolvent Southern California Edison, which has contributed more than $350,000 to Davis' campaign coffers. Now his drive to save the battered utility, which claims nearly $4 billion in debt and is no longer creditworthy enough to buy power, has gone into overtime, with no solution yet in sight. An attempt to bring the California Assembly back from its summer recess to vote on a new bailout bill Friday was just the latest such effort to fall apart. ??The drive to bail out Edison, one of the biggest proposed corporate rescues in U.S. history, remains very troubled, despite a flurry of high-level activity over the past two weeks. The Aug. 15 deadline for legislative approval of some semblance of the very sweet deal negotiated last spring by Davis looms, yet the California Legislature is in recess until Aug. 20. One bill pronounced unacceptable by Edison, backed by Senate President John Burton, the fiery San Francisco liberal, and Sen. Byron Sher of Palo Alto, passed the Senate last week before the Legislature went on recess. ??This bill would require Edison -- which lobbied through the disastrous electric power deregulation scheme in 1996 and made billions in profits, which were transferred to the utility's holding company, before being outmaneuvered by the very firms to which it sold its power plants -- to eat more than a billion dollars in losses. Not surprisingly, Davis and Edison preferred a more generous bill by Assembly Speaker Bob Hertzberg of Los Angeles. But that bill, its fate complicated by an even more straightforward bailout offered by another Los Angeles Democrat, didn't make it through the Assembly. ??Hertzberg and Davis have just failed in a bid to bring the Assembly back into session to pass another bailout bill, this one more generous than the Hertzberg bill that stalled last week, omitting the state's acquisition of transmission lines that would make the transaction a "buyout rather than a bailout," as the governor's mantra went. The transmission lines are major strategic assets affording the state more leverage over power generators, which is why their acquisition by the state is opposed by the Bush-Cheney administration. ??The bailout is a huge priority for Davis, who has populated the top ranks of his energy team with Edison alumni. Davis' new communications chief, former Al Gore press secretary Chris Lehane (who had been working for an Edison bailout at the same time he worked for the state, until the conflict-of-interest heat finally got too hot), has said: "The governor and Edison have the same energy policy" -- a striking point of view, and not at all inaccurate. But the original Davis bailout plan -- negotiated, oddly, on behalf of the state by former Southern California Edison president Michael Peevey -- received little support beyond that of Edison and the Los Angeles Times, on whose board Edison International chairman John Bryson, one of the principal backers of deregulation, once sat. So Davis joined with Hertzberg for slightly tougher versions of the original deal, only to see them languish, with only the substantially tougher version backed by Burton, his frequent antagonist, currently standing. ??Of the $1 million Davis raised from utilities and energy companies since he started running for governor (he has stopped taking energy money), Edison has provided by far the biggest chunk, over 35 percent. This is twice as much as given by now bankrupt Pacific Gas & Electric, a larger company. ??The ties and tilt are obvious. Not only did Peevey head the administration's negotiation with the utilities, but former Edison executive Vikram Budhraja has a $6.2 million state contract to manage the state's $43 billion in long-term power contracts. And Davis officials were remarkably mum on the woes of Edison's San Onofre nuclear power plant, one reactor of which was offline for the first five months of the year, despite the fact that the accident caused blackouts, raised serious questions about the company's management and maintenance practices, and cost the state a billion dollars for replacement power. These close ties have been pointed up by the governor's hiring of two nationally prominent spin controllers, former top Clinton-Gore operatives who helped Davis finally accede to the obvious and pound away at the White House's dense web of connections to the energy industry. Ironically, their hiring highlighted the dense web of connections between Davis and Edison. ??Lehane and Clinton damage control counsel Mark Fabiani played a major role in implementing the new strategy of bashing Bush and Cheney. But the two brought an enormous amount of controversy with them to their roles, both because of their $ 30,000 monthly contract with the state and because they worked concurrently for Edison. After some confusing reports several weeks ago suggesting that the duo had dropped their work for Edison, Lehane brushed them aside and told me that, yes, they were still working for Edison to gain a state bailout of the company and that there was no conflict of interest there. "The governor and Edison," he said, "have the same energy policy; there's no conflict in working for both." ??Finally recognizing that that comment was uncomfortably akin to another, more hypothetical statement -- "The president and Enron have the same energy policy; there's no conflict in working for both" -- Davis redefined his relationship with the two. ??Davis let Fabiani go, retaining Lehane but cutting his pay by a third, and requiring him to stop working for Edison. A seemingly fair result, though some public interest advocates insist that state conflict-of-interest law prohibits his employment in any event, pointing out that his work for Edison occurred within the last year. Adding injury to insult, state controller Kathleen Connell, a fellow Democrat who is sharply critical of Davis' handling of the energy crisis, refuses to pay Lehane and Fabiani. ?Meanwhile, top Edison officials said again last week that the utility will go bankrupt without a bailout. Its parent company, Edison International, whose assets have been shielded from the utility's woes after being boosted by transfers of billions from the utility, just posted a big loss. Wall Street had expected a modest profit. ??Despite the Assembly's failure to reconvene, bailout talks will continue among an informal working group of top Davis officials, legislators, staffers and lobbyists. Through the L.A. Times, Edison this week trumpeted its utility's recently improved cash flow, which may well stave off moves by creditors to force the utility into bankruptcy while the politicians try again to sort things out. ??But the governor's close ties to Edison continue to rankle many in the Capitol and elsewhere. Davis has long been aligned with Edison chieftain John Bryson, who made his reputation as a pro-alternative energy Public Utilities Commission president in the Jerry Brown administration before becoming a bete noire to many environmentalists and renewable power advocates in his current role. ??Consumer advocates, like deregulation opponent Harvey Rosenfield of the Foundation for Taxpayer & Consumer Rights, oppose any bailout of the utility, California's second largest, preferring that it join its larger cousin, Pacific Gas & Electric, in bankruptcy. Rosenfield promises to mount an initiative campaign to derail any bailout deal. ??Many legislators feel the same way, noting that the sky did not fall after PG&E went bankrupt. Sen. Mike Machado, a conservative Central Valley Democrat, says that bankruptcy court can do a better job of sorting out Edison's finances than the Legislature. Some liberals privately disdain Edison for its role in crafting the state's deregulation debacle. And Republican legislators are having a field day sounding like consumer advocates. ??Notwithstanding the struggle over the fate of Edison, California is in better shape than most feared a few months ago. Surprisingly mild weather (California's hot summer has materialized in Japan, which just set a record for electric power usage), coupled with increased conservation, power companies controlling themselves to save deregulation and retain the credibility with a divided federal government to enter lucrative new businesses, and federal restraint of the most egregious price spikes have reduced an across-the-board calamity to a mere multifaceted crisis. ??But Davis, who after a very slow start deserves credit for at least some of the good news, is under fire for the huge long-term power contracts his administration negotiated, which, after months of secrecy, turn out to be more expensive than advertised and perpetrate a green blackout, ignoring renewable energy in favor of fossil fuel generation. Not only do the contracts eschew renewables, a number of them provide the actual financial underpinnings for a new generation of fossil fuel plants, guaranteeing their profitability for the companies developing them. A troubling result for the Democratic administration of a state that by itself is the world's fifth-largest economy, especially at a time when most of the rest of the world is criticizing the Republican administration in Washington for refusing to deal with the greenhouse effect. ??Ironically, given all the furor over the Bush-Cheney energy plan, it is the Davis plan that is actually furthering California's dependency on fossil fuels. "The state's contracts are the biggest public power project in the country," notes Center for Energy Efficiency and Renewable Technologies director John White, "and yet they are a festival of fossil fuel development." ??Meanwhile, there has been no federal order of refunds for the astonishing price run-up California has experienced over the past year. With refunds, the state could bail out Edison and perhaps PG&E as well. But two weeks of negotiations in Washington earlier this summer between state officials and power generators went nowhere. Which is precisely where the Edison bailout remains. LOAD-DATE: July 31, 2001 ??????????????????????????????7 of 50 DOCUMENTS ?????????????????Copyright 2001 The Chronicle Publishing Co. ?????????????????????????The San Francisco Chronicle ????????????????????JULY 31, 2001, TUESDAY, FINAL EDITION SECTION: NEWS; Pg. A11 LENGTH: 849 words HEADLINE: S.F. to vote on electric power to the people; Measures would start public utility districts SOURCE: Chronicle Staff Writer BYLINE: Rachel Gordon DATELINE: San Francisco BODY: After decades of trying to persuade San Francisco to take control of its electrical system, advocates of public power now have the issue before city voters. ???"The timing couldn't be better," said consumer advocate Medea Benjamin, co-director of San Francisco's Global Exchange. ???"It's not just the threat of blackouts or the highest rate hikes in history. It's the fact that PG&E is in bankruptcy. It's the depletion of the state budget," she said. "This is a hell of an opportunity." ???The opportunity she is talking about centers on two November ballot measures that would pave the way for creating a public power system and taking Pacific Gas and Electric Co. out of the city's electricity market. ???Under the proposed measures, an elected board of directors would set the rates and have control over everything from the terms for buying electricity to whether to use more renewable energy sources, such as wind, hydroelectric and solar power. ???Public power would base policies "on a more localized basis, where the values of an individual community can be put into practice," said Ed Smeloff, a longtime public power advocate who was recently hired as an assistant general manager at the San Francisco Public Utilities Commission. ???One proposal, an initiative placed on the ballot by residents, calls for setting up a municipal utility district in San Francisco and neighboring Brisbane. The district would be governed by an elected board of directors. ???The other measure, placed on the ballot last week by the Board of Supervisors, would create a municipal water and power agency and would affect only San Francisco. ???PG&E has mounted a campaign to defeat the measures, so far pumping more than $200,000 into the effort. ???"We think the (ballot proposals) are a bad idea," said Frank Gallagher, spokesman for the Coalition for Affordable Public Services, the PG&E-financed group fighting the measures. "They're confusing and do nothing to address the problem." ???The company has a history of opposing public power proposals, derailing a plan in Davis in the 1990s and using a legal challenge to stall the start of Sacramento's Municipal Utility District for two decades. ???For years, private utilities have enjoyed a powerful hold on state and local politicians. But the energy crisis has caused widespread public anger and concern, forcing city and state officials to take another look at public power. ???A poll conducted this month by the Public Policy Institute of California, a nonpartisan think tank in San Francisco, found that nearly two-thirds of Californians support the replacement of private electric companies with municipal power authorities formed by local governments. ???San Francisco already owns a power system, Hetch Hetchy, which provides power for city departments. PG&E provides power to residents and businesses. ???The San Francisco Charter amendment placed on the ballot by the supervisors calls for abolishing the city's existing Public Utilities Commission, which is run by commissioners and a director appointed by the mayor. The proposed public power board would have seven elected directors, but the agency still would retain some ties to City Hall. ???The supervisors' plan is intended to be used as a backup to the municipal utility district -- commonly known as a MUD -- which is considered to be more vulnerable to the expected legal challenges from PG&E. ???"It's a great marriage, and will ensure that we get public power in San Francisco," said Board of Supervisors President Tom Ammiano, chief sponsor of the board's measure. ???San Francisco is not alone in looking at public power. San Diego, the first city to feel the hard pinch of the energy crisis, wants to establish a regional public power system in an attempt to pool resources and bring down energy costs. ???The East Bay Municipal Utility District, which provides water and sewer service, is considering expanding its reach to power. In the Bay Area, the cities of Alameda and Palo Alto already have public power. The two largest public power agencies in the state serve Los Angeles and Sacramento. ???In San Francisco, the pro-public power forces are going to tout the promised virtues of turning the electric utility over to a public authority that by law cannot turn a profit. That, they contend, means lower rates. ???"It's an expectation, but it's also tried and true," said Ross Mirkarimi, campaign director of MUD Now, the group sponsoring the ballot initiative. ???On average, consumers pay 18 percent less for power from public utilities, he said. ???Gallagher, spokesman for the opposition campaign, said ratepayers shouldn't assume that public power means lower energy bills. "There's no way the rates are going down," he said. ???He blamed the energy crisis not on deregulation but on a shortage of electricity, which jacked up prices and undercut reliability. ???"The measures do nothing about supply," Gallagher said. "All this will do is cost people money. You can't just take PG&E's assets. You have to pay for them." ??E-mail Rachel Gordon at rgordon@sfchronicle.com. LOAD-DATE: July 31, 2001 ??????????????????????????????8 of 50 DOCUMENTS ?????????????????Copyright 2001 The Chronicle Publishing Co. ?????????????????????????The San Francisco Chronicle ????????????????????JULY 31, 2001, TUESDAY, FINAL EDITION SECTION: NEWS; Pg. A1 LENGTH: 990 words HEADLINE: Davis' top spokesman bought stock in power firm; Adviser denies conflict of interest SOURCE: Chronicle Sacramento Bureau BYLINE: Lynda Gledhill DATELINE: Sacramento BODY: Already on the defensive over its energy advisers' financial holdings, Gov. Gray Davis' administration came under fresh attack yesterday when his chief spokesman admitted buying $12,000 worth of Calpine Corp. stock last month. ???Steve Maviglio, Davis' acting director of communications, denied that his purchase of the San Jose energy company's stock constituted a conflict of interest. He said he would sell the stock if Davis or administration lawyers asked him to. ???"I invested in a growing California company," Maviglio said. "It's sad when somebody tries to link owning energy stock with a conflict of interest." ???The revelation came the same day that two high-priced consultants Davis brought in earlier this year to help sell his energy policies to the public agreed not to take any money for the work they have done. Davis was criticized for hiring the two, partly because they had also worked as consultants for Southern California Edison. ???On Friday, Davis fired five energy advisers for possible conflict-of-interest problems after they helped negotiate state spot-market purchases or long-term power contracts. Four of the five owned stock in Calpine, and the fifth held Enron shares. ???ON THE DEFENSIVE ???Maviglio, who had the task of explaining the firings, was on the defensive himself yesterday. ???He bought the Calpine stock in June after asking his broker to invest in it when shares hit a certain price, he said. He said that showed he had made his decision independently of whatever action he might have taken in the governor's office on any particular day. ???Calpine's stock has dropped some in the past month. As of yesterday, the 300 shares that Maviglio bought for $12,000 were worth about $11,100. ???Maviglio said he had spoken out against Calpine as much as other energy companies. He also owns Enron stock that he bought in February 1996 and has disclosed on all forms, he added. ???"I've called them pirates and gougers and lumped them in with all the rest of the generators," Maviglio said. ???Secretary of State Bill Jones, an announced GOP opponent of Davis for governor in 2002, said Maviglio should be fired. ???"These actions are unethical and unacceptable," said Jones, who called on the governor's staff to release updated conflict-of-interest statements. "He had the power to promote Calpine through press releases. That seems to me to be a clear conflict of interest." ???Calpine sold the state $14 million worth of power earlier this year and has a large share of the $43 billion in long-term contracts for electricity that the state has entered into. ???Earlier this month, when he threw the ceremonial switch on a new Calpine plant in Pittsburg, Davis singled out the company as being more cooperative with California than out-of-state suppliers that the governor has characterized as gougers. ???IMAGE-POLISHING ???The Davis administration tried to put another energy-related controversy behind it yesterday as the two consultants brought in by the governor to burnish his image agreed to forgo more than $50,000 in work they did for the state. ???Chris Lehane and Mark Fabiani will receive no compensation and will leave the Davis administration immediately, under a settlement in a lawsuit filed on behalf of a national taxpayer rights group. ???Lehane and Fabiani -- nicknamed the "Masters of Disaster" for their work in getting former President Bill Clinton out of political jams -- started in the governor's office in May and were originally supposed to be paid $30,000 a month. ???It was later revealed that they had also worked as consultants for Southern California Edison, which is trying to swing a deal with the state to avoid bankruptcy. State Controller Kathleen Connell said she would not pay the two. ???"It really raises the question in my mind, what is it about conflict-of-interest and other ethical rules that the governor's office doesn't understand?" said Lewis Uhler, president of the National Tax Limitation Committee, which filed the lawsuit. ???In June, Davis said Fabiani was no longer a communications consultant because his work had been "successfully implemented." Lehane, on the other hand, dropped his contract with Edison and signed a new agreement with Davis. ???Lehane's new contract required him to work a maximum of 66 hours a month at $150 an hour. His payments were to be capped at $76,000 for work from June 26 to Nov. 20, 2001. ???'OUTRAGEOUS EXPENSE' ???"This was an outrageous expense to taxpayers," Uhler said. "I believe there was a clear violation of conflict-of-interest laws." ???The consultants decided it was not worth the legal fees to fight the lawsuit, Maviglio said. The two could not be reached for comment. ???"It's shameful when people have to surrender their jobs in public service because of a lawsuit," Maviglio said. ???Jones, who filed a complaint with the Fair Political Practices Commission concerning the two consultants, said, "I think it's clear from recent actions by the governor's office that there have been rampant violations of the state's conflict-of-interest laws. Their attempts to mitigate the damage from these violations is too little, too late." ???Jones said Davis should immediately require all of the consultants hired during the energy crisis to file financial statements. There are 21 advisers involved in power purchasing whom Davis has exempted, he said. ???All the contractors who are required to file reports have done so, said Maviglio. ???In a related development, the Los Angeles Times quoted a source as saying the Securities and Exchange Commission has launched a preliminary inquiry into whether energy consultants advising Davis used inside information to trade stocks of power companies doing business with the state. ???The federal agency began its review late last week, the source said, in response to a request from Jones.E-mail Lynda Gledhill at lgledhill@sfchronicle.com. LOAD-DATE: July 31, 2001 ??????????????????????????????9 of 50 DOCUMENTS ???????????????????The Associated Press State & Local Wire The materials in the AP file were compiled by The Associated Press. ?These materials may not be republished without the express written consent of The Associated Press. ???????????????????????July 31, 2001, Tuesday, BC cycle ?????????????????????????????8:40 AM Eastern Time SECTION: State and Regional LENGTH: 317 words HEADLINE: Will BGE split lead to Calif. power problems? DATELINE: BALTIMORE BODY: ??Whether Baltimore Gas and Electric can remain profitable after spinning off its power generating and marketing efforts to create a new company is the subject of a three-day before state regulators this week. ??Regulators are hoping to avoid the problems that followed the deregulation of the electricity market in California, where skyrocketing power prices led to blackouts and financial problems for utilities unable to pass on higher costs to consumers because of rate regulations. ??The Public Service Commission will decide whether BGE, the largest utility in the state, can remain profitable if it is allowed to leave Constellation Energy Group Inc. later this year. ??Regulators are concerned about the utility's ability to provide electricity to consumers at rates frozen until 2006 under last year's deregulation agreement. ??Constellation announced plans in October to split into two publicly traded companies. Constellation Energy Group would become a fast-growth national power producer and marketer, and BGE Corp., would be a slow-growth company that will include the regulated utility. ??Testimony filed by the state people's counsel, which represents consumers before the PSC, pointed to concerns about the $2.4 billion in debt BGE will carry after the split. ??A consultant to the people's counsel warned that such a high debt level could make it difficult for the utility to handle unexpected problems such as severe ice storms, hurricanes or spikes in the price of electricity. ??Constellation has submitted extensive confidential information to the PSC about the separation, but it is still unclear what could happen if the commission seeks to alter or block the plan. ??Although Constellation has fully cooperated with the PSC, company officials maintain that the state has no authority over the transaction. ??The hearing, which begins Monday, runs through Wednesday. LOAD-DATE: July 31, 2001 ??????????????????????????????10 of 50 DOCUMENTS ???????????????????The Associated Press State & Local Wire The materials in the AP file were compiled by The Associated Press. ?These materials may not be republished without the express written consent of The Associated Press. ???????????????????????July 31, 2001, Tuesday, BC cycle ?????????????????????????????7:17 AM Eastern Time SECTION: State and Regional LENGTH: 651 words HEADLINE: Davis press secretary confirms buying energy company stock BYLINE: By ALEXA HAUSSLER, Associated Press Writer DATELINE: SACRAMENTO, Calif. BODY: ??Gov. Gray Davis' press secretary recently purchased the same energy stock as five consultants the governor fired last week, he disclosed Monday. ??Steve Maviglio confirmed that on June 20, he bought 300 shares of stock in Calpine Corp., a San Jose-based power generator that has received about $13 billion in state contracts to supply electricity for up to 20 years. ??Maviglio's disclosure comes after Davis' office hastily ended the contracts of five consultants who helped negotiate state power contracts and held stock in energy companies. ??In a related development, an anonymous source told the Los Angeles Times on Monday that the Securities and Exchange Commission has launched a preliminary inquiry into whether the consultants used inside information to trade the energy stocks. ??About two dozen Davis energy consultants were required to fill out financial disclosure statements after complaints of conflict of interest by Republicans and consumer groups. ??"When we reviewed them, we found possible violations of the law and took swift action," Maviglio said Monday before Secretary of State Bill Jones issued a press release calling for his termination. ??Jones, a Republican, is a candidate for the GOP nomination to challenge Davis in November 2002. ??Maviglio defended his purchase, saying that he "owns several stocks in companies in all fields that are growing and are based in California." ??Maviglio said Monday that he requested on May 31 to purchase the stock if it dipped to $40 a share, which it did two days after a June 18 ruling by federal energy regulators restricting wholesale electricity prices in California and 10 other states. ??Maviglio served as Davis' chief spokesman urging the Federal Energy Regulatory Commission to impose price ceilings on electricity wholesalers. ??He also said he owns between $10,000 and $100,000 stock in Houston-based Enron Corp. He said he purchased the stock in 1997 and has reported it on financial disclosure forms. He said that it is "closer to $10,000." ??Meanwhile, two energy consultants to Davis have agreed to forgo more than $ 50,000 in work they did for the state. ??Chris Lehane and Mark Fabiani will forgo the payments as part of a settlement with a Sacramento-area resident who filed a lawsuit objecting to their hiring, calling it a conflict of interest. ??Fabiani could not be reached for comment Monday. In the settlement, they admitted no wrongdoing. ??Lehane issued a statement through the governor's office, calling it "simply not worth the bother to challenge the controller in court." ??Davis has come under fire for his May hiring of Lehane, former press secretary for Vice President Al Gore, and Fabiani, a deputy campaign manager for Gore's presidential run. ??They were hired to help shape Davis' response to the energy crisis, and helped craft Davis' aggressive attack on Texas-based energy companies and President Bush. ??Both also have advised Southern California Edison, which is negotiating for state help in avoiding bankruptcy. Financial disclosure forms showed they have each received at least $10,000 from Edison in the past year. ??Davis announced at the end of June that Fabiani terminated his contract, and Davis scaled back Lehane's role with the state. ??State Controller Kathleen Connell then said she would not pay Lehane and Fabiani for any of their work and now the two have agreed they will not fight her decision, Maviglio said. ??Lewis K. Uhler, the Placer County man who filed the lawsuit, said the settlement "accomplished our objectives." ??"We wanted to block the egregious use of taxpayer funds for essentially political spinmeisters," he said. Uhler is president of the Roseville-based National Tax Limitation Committee. ??Maviglio said that Fabiani and Lehane "did good work for the state" and helped the state win victories with federal regulators. LOAD-DATE: July 31, 2001 ??????????????????????????????12 of 50 DOCUMENTS ???????????????????????Copyright 2001 Associated Press ??????????????????????????????????AP Online ????????????????????????????July 30, 2001; Monday SECTION: Domestic, non-Washington, general news item LENGTH: 365 words HEADLINE: ?Calif. Sees $4B Less in Power Refunds BYLINE: KAREN GAUDETTE DATELINE: SAN FRANCISCO BODY: ???California will receive refunds for overpriced electricity, but not as much as it had asked for. ??A closer reading of last week's order from federal energy regulators shows the amount the state will receive could be slashed to just under $4 billion less than half what the state requested. ??Gov. Gray Davis plans to appeal the Federal Energy Regulatory Commission decision Monday, state officials said. Refunds could help prevent the state from raising electric rates to cover its power buying costs, which are now beyond $8 billion. ??''We found a number of disturbing things that lead us to believe FERC may not be so pro-refund as they want Californians to believe,'' said Nancy McFadden, an adviser to Davis. ??For months, Davis and other state officials have asked the commission to rule electricity prices charged since May 2000 to be unjust and unreasonable prices which climbed 10 times higher than past years. ??The state stands to lose a portion of the billions it has spent buying electricity for Pacific Gas and Electric Co. customers and two other financially ailing utilities. Power companies maintain they did not work together to drive up power prices to unreasonable levels. ??The commission's 40-page decision confirms it will only order refunds for power bought since October 2000, rather than May 2000. That means $2 billion less than the state, utilities and others could hope to receive, McFadden said. ??In addition, the commission also said it will not issue refunds for power the state Department of Water Resources bought directly from power companies. FERC only will recognize purchases through the state's now-defunct power market or from the manager of the state's power grid. ??That stripped another $3 billion off the potential refund amount, reducing the refund by a total of $5 billion. State officials had hoped to receive up to $9 billion in refunds. ??A call to FERC for comment was not immediately returned Sunday. ??The commission has ordered an evidentiary hearing, to be completed within 60 days, to determine the size of the refund from providers of wholesale power. ??___ ??On the Net: ??http://www.ferc.gov ??http://www.water.ca.gov LOAD-DATE: July 30, 2001 ??????????????????????????????13 of 50 DOCUMENTS ???????????????????????Copyright 2001 Associated Press ??????????????????????????????????AP Online ????????????????????????????July 30, 2001; Monday SECTION: Domestic, non-Washington, general news item LENGTH: 263 words HEADLINE: ?Texas Inches Toward Power Deregulation BYLINE: NATALIE GOTT DATELINE: AUSTIN, Texas BODY: ???After several delays, the entrance of Texas into the deregulated electricity market is set to begin Tuesday. ??Under a pilot program, officials of the state's electrical grid will begin switching some customers to new power providers at 12:01 a.m. Tuesday. ??The Legislature created the pilot program to give power companies several months to test their systems before full-scale deregulation, which is scheduled to begin Jan. 1 in most of the state. ??Industry officials have promised that deregulation will be smoother in Texas than in California, where it has been blamed for rolling blackouts and skyrocketing utility rates. They say the recent construction of several new power plants in Texas will help the state avoid supply shortfalls that have plagued California. ??The Electric Reliability Council of Texas, which manages the state's grid, gave the go-ahead for the pilot program last week. ??Deregulation allows customers to choose their power provider much like they select a long-distance telephone carrier. Under the Texas pilot program, up to 5 percent of electric customers can switch power companies. ??The pilot program is getting under way nearly two months after its first scheduled start date of June 1. Numerous delays were caused by computer problems. ??While the delays were unfortunate, ''we think waiting until all the systems are ready will let us provide good customer service,'' said Eleanor Scott, spokeswoman for Austin-based Green Mountain Energy. ??___ ??On the Net: ??Electric Reliability Council of Texas: http://www.ercot.com LOAD-DATE: July 30, 2001 ??????????????????????????????14 of 50 DOCUMENTS ???????????????????The Associated Press State & Local Wire The materials in the AP file were compiled by The Associated Press. ?These materials may not be republished without the express written consent of The Associated Press. ???????????????????????July 30, 2001, Monday, BC cycle SECTION: State and Regional LENGTH: 471 words HEADLINE: Federal order limits potential state refunds by $3 billion BYLINE: By KAREN GAUDETTE, Associated Press Writer DATELINE: SAN FRANCISCO BODY: ??California will receive refunds for overpriced electricity, but not as much as it had asked for. ??A closer reading of last week's order from federal energy regulators shows the amount the state will receive could be slashed to just under $4 billion - less than half of what the state requested. ??Gov. Gray Davis plans to appeal the Federal Energy Regulatory Commission decision Monday, state officials said Sunday afternoon. Refunds could help prevent the state from raising electric rates to cover its power buying costs, which are now beyond $8 billion. ??"We found a number of disturbing things that lead us to believe FERC may not be so pro-refund as they want Californians to believe," said Nancy McFadden, an adviser to Davis. ??For months, Davis and other state officials have asked the FERC to find electricity prices charged since May 2000 to be unjust and unreasonable - prices which climbed 10 times higher than past years. ??The state stands to lose a portion of the billions it has spent buying electricity for Pacific Gas and Electric Co. customers and two other financially ailing utilities. Power companies maintain they did not work together to drive up power prices to unreasonable levels. ??The FERC's 40-page decision confirms the commission will only order refunds for power bought since October 2000, rather than May 2000. That means $2 billion less than the state, utilities and others could hope to receive, McFadden said. ??In addition, the FERC also said it will not issue refunds for power the state Department of Water Resources bought directly from power companies. FERC only will recognize purchases through the state's now-defunct power market or from the manager of the state's power grid. ??That stripped another $3 billion off the potential refund amount, reducing the refund by a total of $5 billion. ??The DWR bought most of its megawatts directly from power companies after a FERC ruling in December abolished the Power Exchange, the state's key entity that bought and sold power. The Independent System Operator, keeper of the state's grid, then began adding a surcharge on big purchases, McFadden said. ??All told, the most the state could expect to get back would be roughly $3.9 billion, said Barry Goode, a legal secretary to Davis. And despite the overcharges, some of that money has to pay power companies for past power deliveries at a price FERC determines is just and reasonable. ??State officials had hoped to receive up to $9 billion in refunds. ??A call to FERC for comment was not immediately returned Sunday afternoon. ??The FERC has ordered an evidentiary hearing, to be completed within 60 days, to determine the size of the refund from providers of wholesale power. ??--- ??On the Net: ??http://www.ferc.gov ??http://www.water.ca.gov LOAD-DATE: July 31, 2001 ??????????????????????????????15 of 50 DOCUMENTS ???????????????????The Associated Press State & Local Wire The materials in the AP file were compiled by The Associated Press. ?These materials may not be republished without the express written consent of The Associated Press. ???????????????????????July 30, 2001, Monday, BC cycle SECTION: State and Regional LENGTH: 539 words HEADLINE: Developments in California's energy crisis BYLINE: By The Associated Press BODY: ??Developments in California's energy crisis: ??MONDAY: ??- After several delays, the entrance of Texas into the deregulated electricity market is set to begin Tuesday. Under a pilot program, officials of the state's electrical grid will begin switching some customers to new power providers at 12:01 a.m. Tuesday. ??- The third largest bankruptcy in U.S. history is also becoming the most complex. As Pacific Gas and Electric Co. wades through its pile of debts, many of the legal and financial teams representing the utility and its creditors often run into conflicts of interest. ??- The state has been joined by natural gas industry players in accusing Houston-based El Paso Corp. of restricting the flow of natural gas into California to drive up its price and ultimately the cost to ratepayers. The gas shippers that lease the pipeline space now also say El Paso is to blame for soaring California energy prices. Those accusations came following a federal regulatory hearing in May, the San Francisco Chronicle reported Sunday. ??- California will receive refunds for overpriced electricity, but not as much as it had asked for. A closer reading of last week's order from federal energy regulators shows the amount the state will receive could be slashed to just under $4 billion - less than half of what the state requested. ??SUNDAY: ??- Gov. Gray Davis plans to appeal the Federal Energy Regulatory Commission decision, state officials say. Refunds could help prevent the state from raising electric rates to cover its power buying costs, which are now beyond $8 billion. ??WHAT'S NEXT: ??- The deadline for the Legislature to approve Davis' rescue deal for Southern California Edison is Aug. 15. ??THE PROBLEM: ??High demand, high wholesale energy costs, transmission glitches and a tight supply worsened by scarce hydroelectric power in the Northwest and maintenance at aging California power plants are all factors in California's electricity crisis. ??Southern California Edison and Pacific Gas and Electric say they've lost nearly $14 billion since June 2000 to high wholesale prices the state's electricity deregulation law bars them from passing on to consumers. PG&E, saying it hasn't received the help it needs from regulators or state lawmakers, filed for federal bankruptcy protection April 6. Electricity and natural gas suppliers, scared off by the companies' poor credit ratings, are refusing to sell to them, leading the state in January to start buying power for the utilities' nearly 9 million residential and business customers. The state is also buying power for a third investor-owned utility, San Diego Gas & Electric, which is in better financial shape than much larger Edison and PG&E but is also struggling with high wholesale power costs. ??The Public Utilities Commission has approved average rate increases of 37 percent for the heaviest residential customers and 38 percent for commercial customers, and hikes of up to 49 percent for industrial customers and 15 percent or 20 percent for agricultural customers to help finance the state's multibillion-dollar power buys. ??--- ??On the Net: ??Track the state's blackout warnings on the Web at www.caiso.com/SystemStatus.html. LOAD-DATE: July 31, 2001
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